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The 7 Most Important Things To Know Before Buying or Starting a Business

If you are in the market to buy a small business, it's important to find a business that interests you, fits your lifestyle and lends itself to profitability. Before you begin your search, you must first define your buying criteria and develop a clear picture of what you’re looking for in a business. Be very specific on the type of business you'll even consider. Otherwise, you can waste a lot of time looking at businesses that won’t work for you. Take the following things into consideration when making this life decision:

1. Determine Your Lifestyle Needs

The best business for your best friend may not be the best business for you and your personal lifestyle goals. Do you want this business to be a side-hustle that takes up your evenings or will this business be central to your livelihood?

How much involvement would you like to have in the day-to-day operations? You can be very present in the day-to-day operations as an active investor or choose to be more hands-off as a passive investor by hiring people to run your business.

Will your business be a small “lifestyle” venture that supports your family only or will you grow it into a behemoth empire with an IPO on the horizon? Will this business complement or augment an existing business you own?

There are business models that work well for each type of business and lifestyle objective, so you’ll want to choose one that fits your preference accordingly.

No one can answer these questions but you. Once you are able to pin down your lifestyle preferences, you’ll be in a good place to find the ideal business to purchase.

2. Define Your Skills and Strengths

If you’ll be buying a business, you should know exactly where you will fit into the equation. If you will be enhancing a business you’ll buy, you should know how you’ll do that. You might be excellent at marketing or computer programmer. How could that strength fit into the business you’ll buy?

Let’s say you are looking at a karate gym that has no problem attracting customers and generating revenue, but you notice the owner has a problem with keeping good records or getting repeat business. If either of these business deficiencies is your forte, it may be an opportunity to add value to the business asset.

On the flip side, a business that needs a strong management presence would not be ideal if you’ll be a passive investor or not willing to hire top-notch management personnel. The point here is finding a business where your knowledge and expertise will add value and equity to the business.

3. Determine Your Industry and Target Market

Once you pin down your strengths, you’ll want to research your preferred industry or niche. Certain businesses will thrive under very specific conditions, while others will tank. A fancy pet grooming shop in a working-class community may not be a good fit, just as a pool construction company in a cold-weather climate may not do well.

Understand the likelihood of capturing market share in a given industry based on current market conditions. You’ll also need to research market dynamics (like a changing neighborhood or regulations) along with impacts they could have on your business.

Finally, consider where your strengths and passions lay when choosing an industry. If your passion is growing revenue, a “boring” lampshade manufacturing outfit could do. If you’re looking at buying a rock-climbing gear store without much knowledge or passion, make sure you understand how you’ll remain interested and bring improvement to that business.

4. Select Your Location

These days, you can find a business almost anywhere with the help of technology. However, you’ve got to know the locations where you will be comfortable operating your business. Are you planning to relocate? If not, you’ll likely want something local. If you will be a passive investor or are considering a digital business model, location may not matter much.

Also, the industry you choose may also have a bearing on the location. There are some businesses that do well in some regions, but not so well in others. Take these points into consideration and select your location preferences so your buying criteria is specific enough.

5. What's Your Expertise

Having something you already know something about will shorten your learning curve and remove an obstacle to being successful. The more you can remove those unknowns the better. You can make something you love or know a full-time business.

6. How Soon Does Your Business Need to Make Money?

Having a cushion to start your business is so important because it can often take a few years before you actually make money. In the beginning it's common to spend everything you make just getting the ship moving forward so try and have a fallback income source either savings or another income. It'll make life easier.

7. Ask for HELP

Don't expect that you'll know everything you need to know to start your company or to buy a business that's already making profit. Just know that no matter the issue someone else already has the answer so don't worry, just ask a professional. Our clients get much of what they need to start, buy, sell, or grow with investment from our partners to grow by leaps and bounds. Call or email us for help anytime.

Axis Business Advisors

Phone: (310) 454-4724


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